Northwell chief says Obamacare rule change led to insurer's early death

Northwell Health chief executive Michael Dowling said the system's decision to disband its insurance company will not hinder its plans to better manage patients' health in order to capture the savings of reduced costs.

Health systems in New York are increasingly striking deals with insurers to be paid for keeping patients healthy and out of hospitals—not for each test and procedure. Northwell had hoped to capitalize on that change by setting up an insurance company. By becoming both the payer and the provider, it could control costs and keep more of the savings.

Northwell said last week that it was still managing the care of 400,000 people, including 125,000 CareConnect members. Dowling said the planned closure of its insurance arm doesn't mean that Northwell would shy away from embracing value-based care. He believes CareConnect would have been successful if not for flaws in the Affordable Care Act, which forced the insurer to pay $112 million as part of the federal risk-adjustment program last year.

"This to me is not a verdict on providers being able to run an insurance company," Dowling said. "This is a verdict on stupid regulation that makes no sense."

Dowling said the experience of creating and running an insurance company led to other benefits. The system, for example, set up Northwell Health Solutions to manage its participation in initiatives aimed at moving care away from a fee-for-service payment system, including a Medicare Pioneer Accountable Care Organization, bundled-payments programs and commercial value-based contracts.

"The fact that we started the insurance company resulted in us building enormous capability in managing care," he said. "It has set us up with a population-health strategy in a more robust way than we could have ever done."

Initially Dowling said he planned to give the insurance company five to 10 years to become profitable. But ultimately the plan spent just three years in the individual and small-group marketplaces. "I always believed it would be five to seven years to be successful," he said. "That would be under normal circumstances."

But he said Congress failed to fund the so-called risk-corridor payments, costing CareConnect more than $100 million. "The rules changed," he said, "and when you're taking risk-adjustment-related losses to the extent we were, given other obligations we have, we'd be foolhardy to continue."

"Health system chief says Obamacare rule change led to insurer's early death" originally appeared in Crain's New York Business.